Travel Expenses: Tax Deductible or Not?

A tax deduction can be claimed for travel expenses in connection with work or business. Travel expenses include:

Deductible travel expenses include:

  • Airfares
  • Accommodation
  • Meals
  • Incidental expenses such as taxi, hire car, bus and train fares

If travel includes a private component such as a holiday at the conclusion of a conference then the expenses must be apportioned. Expenses that are integral to the travel such as airfares remain fully deductible when the main purpose of the trip is work or business.

Travel where the main purpose is to study, will be deductible where the purpose of the study is connected to current income earning activities. Study expenses that lead to a new type of work are treated as capital in nature and are not deductible. In some circumstances, the first $250 of travel expenses for study purposes will not be deductible.Travel expenses for an accompanying spouse or other family member are not deductible.
Receipts must be kept to substantiate travel expenses however a record keeping exemption applies to employees receiving a travel allowance. This exemption is useful for self-employed people operating via a business structure such as a company or trust as the business can pay the self-employed person a travel allowance. The exemption applies to a travel allowance covering the costs of accommodation, meals and incidental travel and must be fully expensed by the employee.

The employee can then claim a deduction for travel expenses up to a reasonable limit as set by the ATO without the need to keep receipts.
Receipts must still be kept for overseas accommodation and if the travel is for 6 nights or more a travel diary must be kept recording the date, time, place and duration of each stay.

If travel expenses exceed the ATO reasonable limit an employee may choose to claim only up to the ATO reasonable limit or claim all expenses and keep full receipts. In this case, a travel diary must be kept if the travel is either domestic or international for 6 nights or more.
If a travel allowance isn’t received then full receipts must be kept along with a travel diary for both domestic and international travel if the travel is for 6 nights or more.

Nick Street is Principal at Wilson Pateras – Accountants & Advisors